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Existing Home Sales (Apr.)

Existing home sales fell once again in April, although for now they remain above their pre-COVID-19 level. But, with mortgage rates set to stay high and credit conditions unlikely to loosen significantly, sales will fall further this year. Indeed, buyer traffic dropped sharply in April. We expect sales will fall back to around 5m annualised by end-2022.
Matthew Pointon Senior Property Economist
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US Housing Market Focus

Looser mortgage standards won’t keep the party going

In contrast to the mid-2000s, there seems little chance of a significant loosening in mortgage lending standards in response to higher interest rates today. Traditional banks have not forgotten the financial crisis and, after a 37% rise in house prices in just two years, they are understandably being cautious. Non-banks have a larger incentive to compete standards lower, but with the private label securitisation market still small they are limited to selling to the Government Sponsored Enterprises, who have strict eligibility standards. Accordingly, the surge in mortgage rates will not be offset by an easing in lending standards, and that means housing market activity has further to fall. Real Estate Drop-In (6th July, 2022): Join our US Commercial Property team for this 20-minute briefing on why we think this is the market top – and how far we expect returns to fall. Register now.

1 July 2022

US Housing Market Data Response

Case-Shiller/FHFA House Prices (Apr.)

House price growth is finally showing signs of slowing, in line with measures of housing market activity which peaked at the start of the year. Soaring mortgage rates are shutting some buyers out of the market and forcing others to cut their budgets. While a tight market argues against a house price crash, a small fall to around -5% y/y by mid-2023 now looks likely.

28 June 2022

US Housing Market Update

The anatomy of a housing market downturn

Measures of housing market activity and prices tend to follow a predictable sequence in downturns. In this Update we highlight the key US and UK variables that clients should follow to track the housing downturn and identify turning points. With most indicators already softening in both countries, it is just a matter of time before house prices fall. In view of the wider interest, we are also sending this US Housing Update to clients of our UK Housing Service.

24 June 2022

More from Matthew Pointon

US Housing Market Update

Mortgage debt service ratio to remain low

The surge in mortgage rates has led to a sharp deterioration in home affordability. But that doesn’t mean the mortgage debt service ratio, the share of disposable income spent on mortgage payments, will also surge from its current low level. Existing borrowers are protected by long-term fixed mortgage rates, and tight credit conditions argue against a large rise in debt-to-income ratios for new buyers. While home sales will take a hit from higher interest rates, the housing market will remain resilient to future shocks.

19 May 2022

US Housing Market Data Response

Housing Starts (Apr.)

Housing starts dropped by a marginal 0.2% m/m in April, driven by the single-family sector which also saw building permits fall for the second month in a row. Housing demand is faltering due to a surge in mortgage interest rates to a 12-year high, which helped push homebuilding confidence to a two-year low in May. That said, pent-up demand from the past couple of years means we are not expecting a crash in housing market activity, and single-family starts will fall gradually to around 1m annualised by end-2022.

18 May 2022

US Housing Market Chart Book

Mortgage rate rise hits housing market activity

The rise in mortgage rates, to a 12-year high in mid-April, is now starting to weigh on housing market activity, with new and existing home sales falling back over the past couple of months. With rates set to increase to 5.6% by mid-2023, that decline in sales will continue. However, plenty of pent-up demand from the last couple of years means a substantial fall in sales is unlikely. We expect existing home sales to drop to 5m annualised by end-2022, with new home sales seeing a small decline to 700,000 annualised over that period. Single-family starts will also fall back, in part due to the large number of homes now under construction. Rental demand is easing, as the recent surge in rents stretches affordability. That will bring rental growth down from 15.7% y/y at the start of 2022 to around 5% y/y by the end of the year. Beyond that, the boom in apartment starts seen last year will start to boost supply, and vacancy rates will stabilise at around 4.5% from mid-2023.

10 May 2022
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